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Project Evaluation

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Submitted By ayr92766
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Abstract
The following report will provide recommendations in regards to three separate project evaluations. Using three different rates for each of the three projects, the net present value, the internal rate of return, and the payback period will be evaluated in each case. It will also offer project selection recommendations for each scenario based on the net present value, as well as project selection recommendations based on the internal rate of return and the payback period.

Project Evaluation
The following three projects have been broken down and evaluated based on each of the provided scenarios. The net present value, payback period, and internal rate of return are included for each project.
Project 1: | Cash Flows | Year 0 | $ (30,000) | Year 1 | $ 11,000 | Year 2 | $ 11,000 | Year 3 | $ 11,000 | Year 4 | $ 11,000 | Year 5 | $ 11,000 |

Scenario 1 – using 5% NPV Rate – Calculations are as follows:
-$30,000+ $11,000(1+0.05)1+ $11,000(1+0.05)2+ $11,000(1+0.05)3+ $11,000(1+0.05)4+ $11,000(1+0.05)5 =
-$30,000 + $10,476.1905 + $9,977.3243 + $9,502.2136 + $9,049.7272 + $8,618.7878 = $17,624.24 NPV
Payback period = 2.727 years
IRR = 24.32%
Scenario 2 – using 5.5% NPV Rate – Calculations are as follows:
-$30,000+ $11,000(1+0.055)1+ $11,000(1+0.055)2+ $11,000(1+0.055)3+ $11,000(1+0.055)4+ $11,000(1+0.055)5 =
-$30,000 + $10,426.5403 + $9,882.9766 + $9,367.7503 + $8,879.3842 + $8,416.4779 =
$16,973.13 NPV
Payback period = 2.727 years
IRR = 24.32%

Scenario 3 – using 6% NPV Rate – Calculations are as follows:
-$30,000+ $11,000(1+0.06)1+ $11,000(1+0.06)2+ $11,000(1+0.06)3+ $11,000(1+0.06)4+ $11,000(1+0.06)5 =
-$30,000 + $10,377.3585 + $9,789.9608 + $9,235.8121 + $8,713.0303 + $8,219.8399 = $16,336.00 NPV
Payback period = 2.727 years

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